This application relates generally to transaction processing. More specifically, this application relates to methods and systems that provide presentation instruments used in transactions with multiple functions.
Currently, transaction processing is handled in a manner that is largely focused on the needs of financial institutions that may be involved in the transactions as third parties. For example, in the case of credit transactions, a customer is typically provided with a credit card by a financial institution, with the card having information on it in the form of a magnetic stripe to identify a credit account maintained by the financial institution. The customer is able to engage in transactions by presenting the card information, either by presenting the physical card itself, such as during a transaction at a “brick & mortar” merchant location, or by presenting the card number, such as during a telephone or internet transaction. The transaction is effected by the merchant transmitting the credit-card information to an authority, who issues an authorization or denial depending on whether the transaction amount comports with terms associated with the credit account. The customer does not actually pay for the transaction until he makes a payment in response to an invoice provided by the financial institution, usually on a monthly basis.
In another example, transactions may be effected using debit instruments. Such transactions may superficially appear to be similar to credit transactions in that a customer is provided with a debit card by a financial institution, which may be presented during transactions so that the merchant may seek approval from an authority. In this instance, however, the authorization depends on a balance in an associated financial account rather than on a predetermined credit limit, and funds are automatically transferred in response to the transaction. In still other examples, transactions may be effected using checks or alternative methods to access demand-deposit-account (“DDA”) funds, whose processing is typically on the order of days and may involve routing through a reserve system and/or the Automated Clearing House (“ACH”) system.
Since this structure is focused on the needs of financial institutions, it is unsurprising that there are a number of disadvantages associated with it from the perspective of customers and merchants, who are the principal parties in transactions. From a customer's perspective, the system is rigid, lacking in flexibility to provide significant choice in processing, and requiring that the customer maintain multiple instruments merely to be afforded the ability to engage in different types of transactions. From the perspective of merchants, there are numerous transaction costs that must be borne and which vary depending on the level of risk that the transactions represent for the financial institutions, and merchants are also denied significant flexibility of choice. For example, ACH transactions may be provided at relatively low cost, debit transactions at intermediate cost and varying depending on whether they are accompanied by a customer signature, and credit transactions at relatively high cost. The differences in risk to the financial institutions that these cost differences represent are generally associated with whether the transactions are guaranteed and the timing with which funds to support them are received.
There is, accordingly, a general need in the art for methods and systems that provide greater choice and flexibility to customers and merchants, while also accommodating concerns of involved financial institutions.